- The Washington Times - Wednesday, October 24, 2001

The House yesterday approved a plan to issue war bonds to let Americans support the nation's campaign against terrorism.
The legislation, approved by voice vote, authorizes the Treasury Department to sell its first war bonds since the end of World War II. The Freedom Bonds are similar to Treasury-issued savings bonds, which provide consumers with a safe investment backed by the government.
Supporters of the legislation say bonds sold in the name of counter-terrorism would boost the country's morale and allow residents to demonstrate their patriotism.
"Americans want to get involved in this effort, and we need to find constructive ways for them to participate," said Rep. John E. Sweeney, a New York Republican who sponsored the House measure.
The legislation was to move to the Senate, which attached an identical bill last month to the annual spending plan for the Treasury Department. Supporters say a final version of the legislation will reach President Bush's desk by the end of fall.
Mr. Bush's Treasury Department has reacted coolly to the idea of new war bonds, although supporters say the administration is likely to support the legislation if it clears Congress overwhelmingly.
The Treasury has said consumers can do more to support the nation's war on terrorism and its slumping economy by spending money. Consumer spending accounts for two-thirds of economic growth.
Economists also said the government did not need the money, since the economic boom of the late 1990s produced federal surpluses.
"We hope that consumers anxious to put their money to work for the nation will make the purchases planned September 11, as consumer spending is vital to the economy," Treasury spokeswoman Tara Bradshaw told the Associated Press this week.
Proceeds from the sale of Treasury savings bonds go into a pot of money for general government spending. The proceeds from the sale of new war bonds also would go into that pot, Mr. Sweeney said.
Lawmakers considered a requirement that would make all proceeds go toward the country's military effort, but decided that debating such a measure would take too much time, Mr. Sweeney said.
Instead of issuing new bonds, critics say, the government could simply ask consumers to buy from two existing lines of savings bonds, the series I and the series EE. Each bond is available in denominations from $50 to $10,000 and yields an interest rate of 5.92 and 4.5 percent, respectively.
"This is an unnecessary thing. The country doesn't need new war bonds," said Jack Quinn Sr., chief operating officer of U.S. Savings Bond Consultant, a New Jersey company that researches government-issued savings bonds.
Mr. Sweeney said the new bond effort is not designed "to compete with consumer spending. This simply gives us an alternative source of funding for the future."
The plan gives the Treasury the power to set the new bond's yield and maturation date.
Even if the measure wins quick approval in Congress, it likely will take months for the Treasury Department to develop a new series of bonds.
The most recent savings bond offering, the Series I, took 18 months to create before its debut in 1998, according to the Treasury.
The legislation does not include a provision for the issuance of so-called war stamps, which were used to raise money for the government during World War II.
War bonds may appeal to investors who are seeking a safe place to put their money, said Tom Ochsenschlager, a tax partner at accounting giant Grant Thornton International.
"People won't feel investing in their government is risky," he said.
The U.S. government first sold war bonds to help finance the Union effort in the Civil War.
World War II bonds essentially were a version of existing savings bonds, initially offered in May 1941 as "defense bonds" and then war bonds after the Japanese attack on Pearl Harbor that December.
More than $185 billion in bonds were sold from 1941 to 1945.
Unlike now, the government needed that money, said Sung Won Sohn, chief economist at Wells Fargo & Co., the nation's fourth-largest bank.
"In this new conflict, we're talking about limited air strikes. We're talking about funding a much different kind of war" than World War II, he said.
Historians say support from Hollywood was critical to the success of the World War II war-bond effort. The government enlisted help from popular movie stars of the time, including James Cagney, Carole Lombard and Bob Hope, to promote war bonds.
Supporters of the new bonds say they also will turn to celebrities for promotional help. Mr. Sweeney said he has written the Advertising Council Inc., a New York group that developed the war bond campaign during World War II, to promote the new bonds.

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